I’ve said this before – in Carbon Tax Now – but you could be excused for missing it, because that was mostly about carbon taxes, oddly enough. So I’ll be more explicit, here, and argue for solving GHG emissions as a matter of economics, to be handled by taxation, rather than as a matter of morality, but be handled… somehow. Context: Eli wants to handle it as ethics. And a fair amount of the comments on Can global emissions really be reduced? are about this. Disclaimer: I don’t understand economics.

I think this view (the morality view) is shared by, say, Greenpeace, whatever their public pronouncements about costs might be. They think GW is Bad and should be forbidden. Not taxed; not slowed; not ameliorated; not adapted to: forbidden. This is the moral approach: it is a bad thing, so don’t do it.

This is the approach we adopt for, say, murder. Or rape. Or a host of other crimes: they are forbidden. You can’t pay blutgeld as reparations for murder and avoid prosecution: this isn’t ancient Norway, or present-day Saudi Arabia (and let us not complicate the issue by worrying about the rich and lawyers).

But its not the approach we adopt to smoking. Smoking is Bad, but its not forbidden, its heavily taxed. Partly in order to discourage it, and partly as a pure money-raiser, which I admit complicates the analysis. And smoking differs from Murder in that whilst it may be Bad, in that your mummy told you not to do it, it isn’t morally bad. [Would be nice to throw in another couple of examples here: anyone?]

And emitting GHG’s isn’t morally bad, in itself: only the GW consequences are. But they are “balanced” by “good”s, which are the things we get from burning GHG’s: light, heat, shelter, food, cheap shit from China. I say “balanced” because whilst they are goods and bads, they probably don’t balance. Indeed all economic analyses say that the goods (far) outweigh the bads. Anyway, that is to wander from my point.

Dealing with GHG’s as a matter of ethics throws up the problem that we might well not agree on our ethics. Though dealing with it economically throws up the problem that we don’t agree on the costs, true. Do you think polar bears going extinct is Bad? If so, how Bad? Is it bad enough to rule of GW all by itself (I doubt that would fly) or does it need other buttressing bads (in which case it isn’t absolute). And so on.

Some have raised the “intergenerational moral issue” as though it may a qualitative difference. I don’t think it does. Indeed I don’t think it even appears in the economic analysis, because ownership of assets and debts just cascades: it makes no difference to the analysis whether you live a long time, or if you children pick up your goods and bads, or their grandchildren do. You could, perhaps, argue that this is a hole in the economics analysis, in which case I’m sure there are scholarly papers discussing this kind of issue.

But in the end, my main reason for arguing for the economic version (with all significant externalities internalised, of course, per std economic theory) is that it is the only approach that has any chance of working. Trying to do it via morality won’t work, but will offer vast scope for special pleading and political interference, all of which is Bad.

[Update: an important question in all of this is, do the gains from CO2 production outweigh the losses? Or, said another way, Are we producing negative wealth?. This was a question I asked yeeeaaarrrsss ago in sci.env, and got no answer. The link points to a paper which suggests that in some cases the answer is that the losses are larger. I don’t know if it is correct.]

I think the point you are missing re ethics in economics is that any discount rate that does not drop to zero (umm… perhaps I mean discount rate increasing to 1) is implicitly a statement that you care about future generations. If you don’t care, your own discount rate may be 5% or whatever now, but there is no reason for it to stay there when you are dead.

[I don’t think so (this is where my lack of econ comes in). That is what I was trying to say in the “intergenerational equity” bit -W]

Why don’t you think so? What return would you want to see on a 100y investment, and would that be different if you were child-free?

[I’m not sure precisely how it works. If you want practical experience, I have no 100 year investments, so I can’t say. But nor can I say it would make any great difference to me whether I expected to live that long or not. I’m not child-free, so I don’t know. Perhaps I’d want the money to go to friends children. Or endow a chair.

If you’re trying to ask, what should the long-term discount rate be, or indeed what should mine be, then I don’t know. But since neither does anyone else, that doesn’t seem like such a big hole -W]

I don’t see how you can say it’s not a fundamentally moral question. Typically that means I’m operating with a different definition of one or more important terms.

Economics can suggest the path towards optimal long term growth. But you still need to make an argument that this *should be* our goal, which is inherently a moral argument.

[Economics, of itself, doesn’t carry an implication of growth as a target. That is something that has to be imposed from the outside, by choice -W]

Particularly if the distribution of benefits and risks are unevenly distributed over time, i.e. the intergenerational equity bit.

For example, I have no children and intend to keep it that way. Your children’s future is of marginal value to me. In theory I can live a happier life by making their future worse. You obviously want me to pay a “fair” price for the damages that I’m causing, but, if I don’t have to, why should I? Certainly not because it makes economic sense for me to do so.

I don’t think it is possible to convince people on both sides to give up their “morality” arguments.

Personally, as a libertarian, I consider excessive taxation to be immoral, not just because it is theft, but because people tend to spend their money own money better than governments.

[But what is excessive? Certainly, costing GW by internalising externalities is not excessive -W]

As for economics, it seems too difficult to calculate. What are the benefits? What are the risks? Would it be easier to mitigate the risks with improved building codes, dam projects and other infrastructure?

Or would it be cheaper to provide an incentive for people to grow multiple crops of hemp, throw it in a deep pit and pave over it? (I’m assuming that would be one of the few ways of efficiently extracting CO2 from the atmosphere)

If you don’t fight for ethics you really have nothing. Our economic system, laws, political establishments are all based on shared ethics. You don’t need %100 agreement. You need to fight and win.

[Agreed. But that still doesn’t mean you need to frame every problem as a moral one. Using your arguments, I might consider my employment a moral issue, and be consumed with anger that my manifold virtues are not rewarded in a just way. Instead, I accept the obvious, and treat it as an economic one -W]

“[Ah, but there you are talking about the dangers of second-hand smoke -W]”

Exactly, and we also need to be concerned about second-hand global warming. For example, the rest of the world needs to be concerned about the extraordinary per capita GHG emissions of the United States in particular (and of course also the EU, Australia, Canada). Three-pack-a-day smokers get to everyone (more so decades ago than now), which is why regulations and societal norms about smoking (particularly in the US) have changed.

Now, if we could just get the US to regard GHGs the same as tobacco smoke we would be much further ahead in the climate dilemma.

[Well, you’re the second one to miss this point so I’d better answer. The post is arguing for carbon tax to internalise the externalities of second-hand-CO2, so yes I’m arguing that it should be costed. But no, it doesn’t actively cause disease or immeadiate harm to anyone identifiable, so can’t be banned in the way second hand smoking can be -W]

http://blog.macsales.com/12680-thailand-flood-update-it-may-be-longer-than-we-thought
“… Even once the waters recede, drive industry experts are saying it could take a year for these component manufacturers to replace their machinery, and many may have to relocate as well. Some companies, like Nidec, aren’t waiting for the waters to recede and have sent divers in to unbolt and retrieve equipment. Others, like suspension arm maker Hutchinson Technology, still has $50 million worth of specialty manufacturing equipment bolted to their now-submerged factory floor.

While many analysts have stated that production should be back to normal by the end of Summer 2012, others are now projecting shortages until the end of 2012 at the very least, primarily because many of the components are surprisingly single source supplied….”

As to hundred-year investments — pikers! it’ll take a couple of centuries to restore a missing foot of topsoil to my remote mountainside hobby site.

Some people have no idea how fascinating it can be to watch grass grow.

I haven’t reviewed all the preceding discussion but I’m gobsmacked if you’re seriously advancing the idea that carbon taxes can be justified on purely economic grounds without any input from morality or ethics. Economic theory is great when it comes to determining how to go about achieving certain ends, e.g. reducing carbon emissions. It’s much less useful when it comes to deciding what ends one ought to try to achieve. Does anyone here want to attempt to explain why it’s wrong to value, hypothetically, a few tens of millions more dollars added to the Koch brothers’ net worth more than the well being of the rest of humanity 50 or 100 years from now without invoking any moral or ethical precepts?

William, the discount rate reflects two factors. The first is the rate of return on an alternative investment. If I invest $100 now and expect to receive $200 from my investment in 20 years, is that a good or a bad investment? Well, assuming a base interest rate of 4% per annum on an alternative investment, by the end of 20 years I would have received $219, so the investment was bad.

But on top of that, there is a discount rate based on the probability of receiving the return. What if the investment paid of $400 but there was a 50% chance the firm in which I invested would go bankrupt before it paid of? Well then the investment is still bad. You can represent this economically with a discount rate due to risk of 3.5%. Taking both risk and alternatives into account, the combined discount rate on the $400 is approx 7.5%.

[No problem so far -W]

Back to global warming. There is a small discount rate on global warming damages due to our uncertain knowledge. Small because effects may be worse than we think rather than better. There is also a discount rate due to alternative investments if we assume that only economic damages are relevant. (That assumption is itself a moral judgement, and I would argue that the loss of, for example, the Great Barrier Reef represents a harm to our descendants above and beyond any merely economic losses involved.) The question is whether there should also be a discount rate due to risk in that we may not personally be alive to face the consequences of global warming.

[It is necessary to factor in damages to stuff like the GBR into the costs, of course, otherwise the calculation makes no sense. Please don’t assume I’m talking about economic costs in a narrow sense. How to cost it is another matter -W]

The answer to that question can only be given determining how important is the good of future generations relative to what is good for us now. And that is unmistakably a moral question.

So, it may be possible to tackle climate change as a purely economic question. If the discount rate due to alternative investment plus risk (based on the weighted average of life expectancies of the current population) is sufficiently small, then well and good. But I strongly suspect that unless we take the moral decision that future generations have just as much right to a good life as do we (and hence exclude the discount rate due to risk) then action will not be justified. And it may not be justified, or not clearly justified, unless we reduce the discount rate of alternative investment due to non-economic harms as well.

[Still not convinced. The std projections, on which CO2 emission projections are based, and without which you can’t make temperature projections, assume our descendants are richer than us. Because of what we do, in part -W]

You might want to talk to Tol or to Nordhouse, or to Yohe (Yohe answers polite email questions). Since their calculations on how to deal with the climate change problem (they all agree there is one) depend on the choice of 100 year discount rate, and their insistence that they can use historical market rates pushes them into a lay back and enjoy it and maybe something will pop up, why yes, it does make a difference

And emitting GHG’s isn’t morally bad, in itself: only the GW consequences are. But they are “balanced” by “good”s, which are the things we get from burning GHG’s: light, heat, shelter, food, cheap shit from China.

OK, let’s go for a slightly facetious reductio ad absurdum… The negative moral consequences of my breaking into your house and stealing all your stuff are balanced by positive fact that I get lots of nice stuff.

The intergeneration moral issue is an issue because the positives and negatives are not evenly distributed across time: we get to enjoy all of the benefits without bearing any of the costs; they get to bear all of the costs whilst their enjoyment of the benefits is not assured.

[I’ve tried to explain why I don’t believe that. Firstly, that even if you accept the distributed-over-time point, the intergenerational bit isn’t terribly interesting – more a distraction. Secondly, “they get to bear all of the costs whilst their enjoyment of the benefits is not assuredthey get to bear all of the costs whilst their enjoyment of the benefits is not assured” is wrong. We’re bearing costs (like the cost of building infrastructure). They are getting benefits (use of same). I appreciate your “is not assured” but there are no economic analyses that don’t show our grandchildren better off – or at least, richer – than us -W]

I do not get this… economics as you say is based on ethic/moral so essentially it is about whether any one person think that the proposed moral/ethic/economic is in accordance to their wive of it. I.e. if you think it is morally wrong to kill animals and the economic system do not think that well then they will argue from morals so what really is the point? That it might be possible for some to make a economic system that is ok with their morals? Surly not everyone’s moral?

[Various people have said that economics is intrinsically moral. I’d say rather that it is a framework, and the direction you give it reflects your choices. Like science.

The killing-animals example is interesting. Some people do think that killing animals is wrong. Economics assigns zero weight to that view, because others (the majority) disagree and it isn’t illegal -W]

Building infrastructure is not a “cost” in the sense I’m meaning here. The sort of costs I’m talking about are things like mass displacement of people from low-lying areas, or increased death rates from tropical diseases. Building infrastructure is an investment.

there are no economic analyses that don’t show our grandchildren better off – or at least, richer – than us

Ah, well, you’ve touched on the matter there – is “richer” always “better off”? To take an extreme example, climate change is likely to result in at least some deaths (large scale flooding, agricultural disruption, extended ranges of tropical diseases, that sort of thing) – how much GDP growth does it take to offset those? Is there a moral issue with one population making itself richer at the cost of lives in a different population?

[Well, the tropical diseases stuff is a good example, and often abused. We (in the West) have drained our marshes and produced our vaccines and essentially don’t suffer from malaria any more. That trend will continue, and spread. So I don’t believe the stuff about GW-enables-tropical-disease-spread. Quite the reverse: tropical diseases will continue to contract -W]

And even accepting that argument, there is the matter that whilst future generation may be richer in aggregate, I see no reason to assume that such gains will be evenly distributed. The people facing the greatest risks from AGW are the poorest, whereas the benefits from economic growth have a funny habit of mainly accruing to the already rich. Our (well, your) grandchildren will probably be fine, other peoples’ grandchildren may not be.

[Is that true? In absolute terms, perhaps, but in percentage terms, I suspect the poor have most to gain. What makes you think your point is so clear as to need no evidence? -W]

Also, it might be worth remembering that very few economic analyses predicted the 2008 crash either…

…there are no economic analyses that don’t show our grandchildren better off – or at least, richer – than us -W]

All this is based how the past has played out? So for example if i remember correctly the majority in the US actually has not got it better and better the last decades so interpolate that and it is not at all obvious that they will get it better and better. (not saying that they wont just making the point that it is very economics is a very shaky ground.)

[No, not really. These are the economic scenarios that go into the SRES scenarios for future GHG emissions -W]

And then you have the peak coal movement that say that it will be hell soon (I do not believe that)

So sure cost benefit have to be in there but sourly you do not want to try to leave morals out of it? IMHO it would be impossible…

Various people have said that economics is intrinsically moral. I’d say rather that it is a framework, and the direction you give it reflects your choices. Like science. -W}

Well Depending on how far one wants to take it… is not science intrinsically moral?http://en.wikipedia.org/wiki/Morality
Science only exists because we think it is based on good moral… we have given logic reasoning a higher wight then random nonsense… sure you could argue that economics is less logic and robust then climate science and that philosophy is a step further away, I certainly would. Still I think that all of it is based on moral in some way… the whole is ought question. (and even further can you get a ought without an is? yeah I know boring philosophy)

IMHO it all boils down to where you as a person wants to draw the line… you can not have economics making decisions without morals going in to it… you perhaps could value very similar things but never lives or life value etc… how much is a life in africa worth? In Sweden? Is it right to further increase the economic differences between Sweden and Africa through letting out co2 in the air? (at least shifting the basis for it?) So while some economic analyses are less prone to involve morals I think that in the climate change debate you have to use morals as well… no pure economic system can capture it all….

…there are no economic analyses that don’t show our grandchildren better off – or at least, richer – than us -W]

All this is based how the past has played out? So for example if i remember correctly the majority in the US actually has not got it better and better the last decades so interpolate that and it is not at all obvious that they will get it better and better. (not saying that they wont just making the point that it is very economics is a very shaky ground.)

[No, not really. These are the economic scenarios that go into the SRES scenarios for future GHG emissions -W]

Dunc 19: “The people facing the greatest risks from AGW are the poorest, whereas the benefits from economic growth have a funny habit of mainly accruing to the already rich. Our (well, your) grandchildren will probably be fine, other peoples’ grandchildren may not be.”

If sea level rises to the levels of IPCC projections I wonder how the relocation or storm surge-proofing (if possible) of refineries, which tend to be where there is high vulnerability to sea level rise, will affect the price of oil, etc? I don’t see the shareholders bearing the brunt of such costs, and building new refineries seems to be (from what I’ve read) far more expensive than simply expanding and modernising existing sites.

Does anyone know if such things are taken into account in these economic analyses?

If that’s the case regardless of GHG accumulation, why would we consider reducing emissions?

[I think because the costs are non-linear in CO2 emission, strongly so at the high end -W]

I would presume the only reason we would want to reduce CO2 and other GHG emissions now is that, at some point in the future, the costs of the consequences will/might significantly outweigh the economic benefits of continued fossil fuel consumption.

The question is whether or not we care about this future. If significant costs only begin to accrue at about 100 years in the future, for example, when it’s likely nobody here will be alive (sorry to break the news) then paying now is an investment with an ROI beyond our lifetime. The choices we make on an individual and, partly by extension, at a governmental level seem to me inescapably wound up in ethical considerations concerning our attitudes to society, civilisation and the human race, and will determine our collective action on this issue.

Though dealing with it economically throws up the problem that we don’t agree on the costs, true.

Above, we’re told that economics is subjective, not objective. Well, the way we solve this problem of value is that we take peoples’ subjective values and by saying, well, these are what peoples’ subjective values are, turn them into an objective fact.

Take, for example, the value of a statistical life (and all of the claculations about climate change are just variations on this theme). How do, on average, people value their own lives? No, obviously not, “how much can I pay you to kill you?”, but how much do people demand for greater risks to their lives? What’s the wage premium that trawlermen, lumberjacks, petrol tanker as opposed to other lorry drivers, get? What’s the greater risks of those jobs?

For the US the answer comes out to about $5 – $ 8 million per statistical life.

Sure, entirely subjective, thiese are the opinions of people about the value of a life expressed in what people do.

But that this is the subjective opinion of people is an objective point. It is so, even if their opinions are subjective.

And that’s how we build the valuations of the value of polar bears, lost habitats, species and all of the rest. Not, what should their values be according to some set of ethics: what are their values according to the way that people actually live their lives?

Some say (possibly Eli, I don’t know, this is not an accusation, just a hypothetical) that actually this is wrong. The environment whatever should be judged by some ethical standards. To which the economists answer is, fine, go off and persuade your fellow humans to order their lives according to that ethical standard and our calculations will capture it. But until you do our calculation won’t: for the clear and obvious rason that most people don’t agree with your ethical pricing standard.

It’s untrue that “all economic analyses say that the goods (far) outweigh the bads.” If anything, they show the opposite. Even studies that make ethically fishy assumptions (heavily discounting the welfare of future generations, for example) identify a positive carbon price as optimal, which is to say that, at the margin, the bads of emissions outweigh the goods. In the average, the balance is positive, because we’d all be dead without food, but that’s not policy relevant; the margin indicates that it would be more positive at a lower level of emissions.

I don’t think the practical regulatory aspects (tax vs. ban) really follow from the difference between moral and economic perspectives on the problem.

First, there isn’t an economic perspective in the absence of some ethical choices. Identifying the social cost of carbon requires assumptions about the relative weight to the welfare of current and future and rich and poor people.

The intertemporal question is actually rather crucial in economic analysis. It’s not strictly intergenerational, because most models (except OLG) don’t distinguish between a single infinitely-lived agent and a bunch of individuals with inheritance.

[I’m glad you said that. I’ve been trying to tell people that for some time (see comments above) but they won’t listen -W]

But there’s still a question of whether the representative agent prefers welfare now vs. later. Most models (for example, Nordhaus’ DICE) explicitly prefer welfare now, i.e. they discount the welfare of individuals alive a century from now to nearly nothing.

Second, whether you choose an actual ban, or a de facto ban through high taxes, doesn’t really follow from the moral choice. It’s a matter of practicality – what gets the job done, has low transaction costs, promotes efficient resource allocation, etc.

I do agree that there’s an unwarranted preference for banning things, which is inefficient. However, I think that’s common among a broad spectrum of people, not just greens.

But the whole point is that people have different subjective values. You could ignore that and try to make a number of some peoples hypothetical value on life and use that in the model. That does not make it objective it rather is try to take an average on subjective value. So people that do not agree ofc do the right thing bringing morals in to it.

Another problem is that we do not know the value of many ecosystems so we more or less guess.

However even if we guess right we have to put values on different kind of life in different parts of the world and trade offs between different parts of the world and different income groups and so on… Now that will not be possible unless you do moral judgments like try to say that all life is equal and should be valued the same. Or go to Africa and laugh in their faces. Also you could make a model that shows that USA or some one ells should force them self in and rule the country to make it economically better however you wont since we tend to respect other countries borders and political systems… the same goes for CO2 consequences they will not be fair to all ofc. you could set a price on making an island nation disrepair but with discount that they would want for that… the value would be enormous etc… Saying something is objective does not make it so, almost nothing related to humans really is…

[When it gets to valuing life, people get sniffy about it, true. In particular, valuing poor people’s lives less than rich folks does wind some people up.

Nonetheless there is a perfectly good justification for so doing: it is what TW has already said: you measure it by people’s preferences. How much do rich-world folk ask as a pay premium for doing a risky job? How about poor-world folk? Etc etc -W]

“they discount the welfare of individuals alive a century from now to nearly nothing.” This simply reflects the broad social practice. Too bad our species needs to be hit over the head sharply, often more than once, to change such practices. But even that may be too optimistic, considering how so many politicians and economists would rather wreck the global economy (the U.S. and European components, anyway) than reconsider the economics they learned at their mothers’ knees. It’s very hard to imagine the same group of people successfully grappling with AGW.

“I do agree that there’s an unwarranted preference for banning things, which is inefficient.” Disagree. It’s very hard to get things banned even when there’a a clear case for doing so, to the great detriment of society IMO. Toxic chemicals are the leading example. People certainly do spend a lot of time talking about bans, perhaps because it’s a simpler concept than regulation (direct or via taxation).

[When it gets to valuing life, people get sniffy about it, true. In particular, valuing poor people’s lives less than rich folks does wind some people up.

Nonetheless there is a perfectly good justification for so doing: it is what TW has already said: you measure it by people’s preferences. How much do rich-world folk ask as a pay premium for doing a risky job? How about poor-world folk? Etc etc -W]

yes but that does not make it objective… it is one way of doing it though… it is however perfectly reasonable to object to it. Also a strong argument is that they do not know the value, lack of information make the economy work badly.

[It is a reasonable way, and I know of no better. Do you? Saying “all lives have the same value and all are infinitely precious” just ducks the issue, and of course fails the test of everyday experience -W]

> [But what is excessive? Certainly, costing GW by internalising externalities is not excessive -W]

I would think that would happen naturally. If there are more floods people will either purchase more insurance, houses in different locations (i.e. not floodplains) or put them on stilts.

[You’re missing the point. That doesn’t internalise the externalities; it assigns the externalities to other people -W]

For just about every possible effect of GW people will naturally seek to protect themselves, their communities and their property. Obviously this would be easier for them if they aren’t burdened with high taxes.

As for “excessive,” that is indeed difficult to calculate. The current system that takes over 50% of many people’s incomes is not conducive to productivity and wealth generation.

[That is general taxation, which is a totally different matter. You want a libertarian blog for that, who will explain your confusion -W]

I’m not a religious man myself, but “If 10% if good enough for Jesus, well it oughta be enough for Uncle Sam.”

“they discount the welfare of individuals alive a century from now to nearly nothing.” This simply reflects the broad social practice.

I agree that this is broad practice, but it’s also a self-fulfilling prophecy. Economists observe people acting as if they have a high discount rate, so they model things that way, which helps people to make decisions as if they have high discount rates. There’s a sneaky element to it, in that a lot of economists don’t typically disclose to model consumers that that’s what they’re doing. Some further claim that it’s based on the moral authority of markets revealing the desires of individual agents, which is in conflict with expressed preferences in behavioral research.

“I do agree that there’s an unwarranted preference for banning things, which is inefficient.” Disagree. It’s very hard to get things banned even when there’a a clear case for doing so,…

I completely agree that there are things worthy of banning. My point was that a lot of energy goes into banning things, like incandescent bulbs, for which a ban is a very poor second best alternative to pricing emissions. The result is an extremely complex and loophole-ridden regulatory system that doesn’t actually get the basic job of reducing emissions done. The effort devoted to chipping away at the problem through bans and standards might be better expended on pushing for a tax.

“Any extra costs (i.e. potential climate problems) incurred due to the production of those goods would have to be mitigated by the people causing them through consumption.

If those climate disasters fail to materialize then they don’t get charged for their behavior.

That seems fair.”

Thought experiment on how this “fair” solution would work in practice. If I’m Bangladesh (current population ~142,000,000) and it’s possible that global warming could render half of my productive farmland useless by several decades from now. Do I trust some high-emitting country, say the United States, to make good on a promise they give now (not that such a promise has been offered) to feed, clothe, etc. half my population indefinitely into the future in the event the feared disaster comes to pass? Not likely. Who would or even could force the US to make good if it didn’t want to?

Suppose an improved scientific understanding and Stern report analysis concluded that the cheapest/most efficient/best way to deal with climate problem was to more or less ignore the problem for say 20 years in which time the world would become wealthier and more able to bear the costs. Then, to prevent the CC problems getting out of hand, onerous worldwide regulation requiring all fossil fuel use to be penalised by requiring 150% of carbon emmitted to to be sequestrated. Any failure would need to be heavily fined and the money used for carbon sequestration. The reports also note that will make the next 30 years a period of particular hardship for large numbers of people rather than the economic norm of society getting wealthier.

Is the ‘intergenerational’ issue (yes probably a poor term) largely a separate issue? Can it be regarded as simply a matter for each country to say lets run a government surplus rather than deficit of x% for these 20 years for use over the difficult 30 years that follow?

Or are matters too inter-related and trying to run a large surplus like that might do more harm to the economy so that the expected richer society wouldn’t be as much richer as thought?

[It is a reasonable way, and I know of no better. Do you? Saying “all lives have the same value and all are infinitely precious” just ducks the issue, and of course fails the test of everyday experience -W]

well the point is whether there are better ways or not… all of the way involves moral judgments.

Personally I think that there are to many unknowns to make a good model at the moment and that the part of different nations and groups taking hits from things they are not responsible for which is not reflected in the models makes other moral discussions then economic once necessary…

“My point was that a lot of energy goes into banning things, like incandescent bulbs, for which a ban is a very poor second best alternative to pricing emissions”

‘Phasing out’is a more accurate way of putting it, in most cases. Take the USA which has introduced new efficiency standards. The word ‘regulations’ is bandied about in this context as if it’s some form of government tyranny, but I often think of ‘regulations’ as an alternative way of saying ‘improving standards’. It’s also often said that it imposes a cost on the consumer, but then whole industries spring up to meet the new regulatory standards, which means job creation and more money finding its way back into the economy. Crash helmets are one example.

The first point I want to deal with is the supposedly objective pricing of first and third world lives by economic models. It is, of course, not objective, but merely a weighted mean of a set of subjective valuations. Rather importantly, the mean is weighted by the disposable income of the valuers. This is true of any “valuation” in an economic model, for such valuations reflect “demand” which can be glossed as “desire times available cash to satisfy the desire”. So, to a first approximation in the United States, the top 1% of income receivers have 20% of the vote in this supposedly ethical (or objective) valuation.

Further, this is not a valuation of peoples preferences. People are not, in general, good predictors of the extended impacts of their choices. Quite the contrary. And corporations take great pains to conceal the extended impacts of purchasing particular products. Shell, for example does not advertise at every service station that, “The price of our petrol is reduced by the destruction of the land of the Ogoni people made possible by violent suppression of the Ogoni people by the Nigerian military.”http://www.essentialaction.org/shell/issues.html
Nestle do not advertise on every chocolate bar that, “The purchase of this brand was made possible by profits from selling low nutrition milk products as baby formula in Third World nations with consequent significant increases in infant mortality.”http://www.teachspace.org/personal/research/nestle/history.html
Consequently, the economic inference that people who buy Shell or Nestle products are supporting these activities, which consequently feeds into the relative valuation of first and third world lives does not hold. Nevertheless, (as pointed out by Steve at 34) economists place it in the models as if it constituted a genuine preference, and then use that supposed preference as a justification for the continuation of that valuation.

Rather than assuming that peoples economic activity reflects their true preferences, economists ought to acknowledge that, in the case of a discord between stated preferences and actual outcomes, there is a market failure. People have acted under imperfect information and achieved imperfect results. What is more, even if we could accept these valuations as reflecting genuine economic preferences (a very big if), it does not automatically follow that they reflect ethical preferences. The simple fact is that people are not perfectly ethical. Therefore their actions alone cannot be considered a reliable guide to their ethics. A combination of their actions, level of knowledge, and levels of remorse when their actions fall short of their supposed standards can be, but of these, economists measure only the outcomes of one.

So, it is William who has side stepped the issue at 30. Human experience shows that all lives are not infinitely precious. There are things for which people will choose to risk death, even certain death. But ethically, all lives are equally precious. The correct conclusion from economic studies which show that economic activity values lives differently is to ash why are people in the West so misinformed about the consequences of some of their actions? And why are companies like Nestle (and a host of other examples) permitted to operate as they do?

[You still don’t understand the intergenerational problem :-(. But even leaving aside the economic point – that it doesn’t exist, see previous comments – in this case, the entire problem – CO2 growth, the SRES scenarios – are predicated on a world that grows richer. They make no sense otherwise -W]

“… the thujone-free brands, which contain less than 10 parts per million (p.p.m.) of the chemical, are made with the same relatively small amounts of thujone as the old brews. But scientists wrote in the British Medical Journal that absinthe bottled before 1900 packed up to 260 p.p.m. of thujone–which may not sound like much, but consider that only 15 parts per billion of lead in drinking water is enough to scare regulators ….”http://www.time.com/time/magazine/article/0,9171,1689232,00.html

“The intertemporal question is actually rather crucial in economic analysis. It’s not strictly intergenerational, because most models (except OLG) don’t distinguish between a single infinitely-lived agent and a bunch of individuals with inheritance.”

This is merely because these models adopt a convention from short term economic models where, because of large overlap of the populations of different time periods, this is not effectively and ethical choice. Applied to multi-generational models it is a de facto ethical choice that subsequent generations are as ethically important as the current generation, ie, that a good done for our descendants is as valuable as a good done for ourselves.

I’m glad that economic models have this default ethical position, but that does not mean it is not an ethical position. (Note however, that this default ethic can be overruled in a model by a large discount rate.)

William, with regard to your points in response to my post of 11 PM, Nov 28th:

1) The fact that our descendants are richer than us in all economic models of the impact of global warming is, as I understand it, built into the models as a starting assumption. In essence, the models do not permit expenditure on mitigation or adaption to reduce growth rates, which is highly unrealistic. Consequently I consider the assumption that future generations will be better of in the face of Business as Usual highly dubious. This is particularly true in the likely scenario of the loss of major eco systems such as the Amazon rainforest and Great Barrier Reef.

2) Even if it is true that our descendants will be better of than we are, it is not because we are investing for them. Government decisions are generally made with a time frame of 1 or 2 electoral cycles in mind. Business investments are made with expectations of profitable return within about 20 years at the outside. As the vast majority of us can expect to survive 20 years or more into the future, all these investments can and are made with the intention of our benefit rather than that of future generations. Any benefit they receive is a side effect, not an intended consequence of our current ostensibly “rationally selfish” behaviour according to economic models. Therefore, I would argue, that benefit is irrelevant as a counter point to the moral issue of the effects of our actions re global warming on future generations.

[I don’t see why the benefit is irrelevant, merely because we don’t intend it. You could as easily argue that harm should not to be held to our account, because we don’t intend harm. But in reality they get the benefit, or harm, whether we intend it or not; so both should be held to our account -W]

3) Clearly an action of ours which benefits us and has unintended beneficial effects on others is quite distinct morally from an action of ours which benefits us but has unintended harmful effects on other. Assume we do not consider the harm or benefit to those others as a significant factor in our choice. Then given a choice between these two cases, we will chose the case which benefits us the most. This amounts to applying a discount rate for risk in our costing of global warming policies. Now, if we take that stance, whether the net effect on future generations is positive or negative becomes irrelevant. Consequently, the purported net benefit of future generations is only relevant if you base your discount policy on some ethical principle.

[I don’t think “amounts to applying a discount rate for risk” is correct; it just isn’t that. Regardless, we need to cost both benefits and costs of our actions, weighted by appropriate discount rates (which are up for debate) -W]

4) Given that you do accept some ethical principle in determining the discount rate (so that the purported wealth of future generations is relevant to the discussion), most ethical principles will still enjoin on us that we accept some of the cost of mitigating global warming now even if the future generations are net beneficiaries of our action. The details are complex, however, and therefore not worth pursuing unless you reject your current premise.

[I think you’ve misunderstood me. I didn’t explicitly accept “some ethical principle in determining the discount rate”. I was proposing the “wealth of future generations” as yet another issue to consider, as a counterpoint to those who assert that we are impoverishing future generations -W]

5) Finally, if you do reject ethical perspectives on tackling global warming, the logical thing to do would be to also reject those perspectives when it comes to investment. The consequence would be to expect a greater short term return than is currently the case, shifting the balance of expenditure away from investment towards consumption. That would certainly falsify the supposed wealth of future generations. In other words, your counter argument to ethical considerations in one area of economic decision making assumes ethical influences on another area of economic decision making, and hence is inconsistent.

[I think you may be confusing my personal perspectives, with how I think society as a whole should react. I, personally, use ethical considerations for both response to GW and investment. But assuming you were talking about society as a whole: I think your argument is wrong, just about obviously. Investment, currently, is overwhelmingly *not* done on an ethical basis; the predictions of future wealth are based on that -W]

And your guarantee that the world will grow richer is??? Frankly little better than the BI’s “here occurs a miracle” (or not). Point is that there is no guarantee, that for more of history than not the world has NOT grown richer, that much of the richer in the past four centuries has been from exploiting finite resources, both inorganic and biological and what yah gonna do when the music stops??

[There is no such guarantee. But we can’t have an interesting discussion if you don’t listen. let me say it again, slowly, and hope you hear this time:

* the predictions of future damage from GHG’s are predicated on large increases in emissions (or, equivalently, on the current near-exponential increase continuing)
* those GHG emissions are predicated on increased economic activity
* that increased economic activity is a proxy for increased wealth
* thus, the very scenarios that show up as GW problems are predicated on us being significantly richer (~5 times, say) in the future

Your objection to the above appears to be “finite resources”. This is a valid point, but no-one expects it to fundamentally limit GHG emissions out to 2050, and quite likely not to 2100 -W]

Tom Curtis wrote ” Any benefit they receive is a side effect, not an intended consequence of our current ostensibly “rationally selfish” behaviour according to economic models.”

I thought economic theory allowed people to view themselves as “rationally selfish” and still give money to charity based on gaining a feel good utility gain from feeling you are doing the ‘right thing’. However, I haven’t a clue whether William regards this as a moral valuation that should be excluded from his economic theory for climate change without ethics/morals.

Williams view of where exactly ethics/morals should be left out does seem highly subjective. If it is so subjective on this, doesn’t that leave us with pretty much the same problem as deciding whose ethics to use?

William wrote “GHG emissions are predicated on increased economic activity
* that increased economic activity is a proxy for increased wealth
* thus, the very scenarios that show up as GW problems …”

You seem to be seriously trying to claim that if we don’t get richer though economic mismanagement but our EROEI gets a whole lot worse as we use oil sands and other harder to extract FF, the climate problems will simply dissappear ???

[I’m trying to tell you what the scenarios say. I’m trying to present what I understand to be the std viewpoint, and with which I have no strong reason to disagree. If we stop emitting CO2 then the problems will disappear, but that doesn’t seem likely -W]

William, I think you may have lost track as I shifted stances in my last post.

To my original post you accepted the first portion, allowed that more than a purely economic valuation was needed for things like the GBR, and objected to my final section the future generations are net beneficiaries of our actions, even with BAU and no mitigation (at least according to the models).

[“more than a purely economic valuation was needed for things like the GBR”: not quite, depending on what you mean. The valuation has to be economic, otherwise what does it mean? I said that things like damage to the GBR needed to be included in the costs. Costs are not defined narrowly -W]

My final section established IMO that ethical considerations are relevant to the discount rate due to risk we use in economic models over long time periods (>> 20 years). This follows because without ethical considerations, the benefit or harm of future generations is of zero relevance to us.

[But I’m not convinced by that. See comments elsewhere: infinite life vs infinite generations is arguably the same -W]

Any economic model incorporating that fact, and ignoring economic issues should therefore include a discount rate such that costs and benefits fall in proportion to the proportion of the population that survives over a given period. If on average, only 60% of people alive today will be alive in 30 years, then the discount rate should discount future returns 30 years from now at 60% of their current value. On top of that they should include an additional discount rate equal to the pure rate of return. The overall effect will be that costs or benefits due 90 years from today will be discounted almost completely. Even the epistemically certain loss of Great Britain would only warrant the expenditure of a few dollars to avoid. Beyond 110 years, no possible harm would warrant any expenditure to avoid on this basis.

Now, to my mind, your acknowledgement that more than merely economic costs of the loss of the Great Barrier Reef undermines your position completely. It means you are committed to incorporating explicitly ethical and/or aesthetic values into your model by over valuing (relative to a pure economic model) the Great Barrier Reef. I passed that by (and merely mention it now).

[But I don’t agree. I’m not intimately familiar with the economic literature, but there *is* a literature on how to value stuff. You do it based on, e.g., what will people pay to go and see it, etc etc. It is a std part of the economics of externalities -W]

Your response to the final point is in my opinion not adequate because:

1) The future benefit is by no means guaranteed.
2) Harms and Benefits are morally different, so an unintended benefit does not counter a harm caused, even if unintended.
3) The potential benefit of future generations is irrelevant from a purely economic point of view.
4) Following on from point (3), for anybody who adopts an ethical stance in determining the discount rate, most ethical positions would not allow the unintended benefit to outweigh completely our responsibility for the harm.
5) Following on from point (3), for anybody who rejects ethical considerations in determining the discount rate, simple consistency requires the same rejection of ethical considerations in investment decisions, which if applied render benefits for future generations unlikely.

These are just my preceding points 1 to 5 restated. You appear to think I am attributing particular beliefs to you whereas I was exploring the consequences of adopting particular beliefs. In doing so I believe that I have shown your counter argument to my first post fails.

With regard to your response to my third point, choosing a global warming policy only based on what is best for us is equivalent to applying a large discount rate for risk in our policy determination. The risk in question is personal death which renders all values void after its occurrence (from a non-ethical stance). In an economic model that becomes a weighted discount rate based on the statistics of survival rates, technically of investors or of voters depending on whether it is government or business policy being developed.

With regard to your response to my fifth point, investments are overwhelmingly made with limited ethical consideration today. Nevertheless, investors typically have considerable concern for their progeny, and often for the continued well being of their company, both of which are ethical concerns. Absent these concerns an investors ambition would be to go bankrupt on the day they die, which would significantly alter the discount rate of investment.

[Yes. This is why your previous arguments about intergenerational ethics fail; people can be left to do those themselves -W]

Society thrives because we are all at least a little bit ethical.

[Yes -W]

Do not mistake that thriving for evidence that the our limited ethical practice has no relevance.

Finally, in your dispute with Eli, I believe you to be wrong. IN particular, although the BAU models assume continued economic growth, we only need continued economic growth with BAU for the next 30 years to lock in ruinous consequences potentially coupled with significant negative growth for the following sixty years. What is more, if economic activity is sustained through the exploitation of coal, tar sands, and shale oils, we can have a weakly declining economy coupled with growth in emissions that match those of BAU. There is far more than one way to cook our goose.

>>My final section established IMO that ethical considerations are relevant to the discount rate due to risk we use in economic models over long time periods (>> 20 years). This follows because without ethical considerations, the benefit or harm of future generations is of zero relevance to us.

>[But I’m not convinced by that. See comments elsewhere: infinite life vs infinite generations is arguably the same -W]

Infinite life vs infinite generations could in some circumstances be argued to be the same. For example I have invested in solar panels with guaranteed FIT for 25 years. If I may not live for over 15 years do I ignore last 10 years benefits?. My answer is no, on assumption that I can lease the roof space and panels to effectively sell the asset and still get at least same price for the house. (I do discount the cash flows and in reality the effect was that those last 10 years were unlikely to change the investment decision. However, if electricity prices are rising rapidly those 10 years might be important and a significant fraction of the investment cost.)

Contrast that situation with investment in making society more resilient to climate change in a way that does not create a sellable asset. Why would I value post death benefits if I am not going to be alive to see those benefits, unless ethics are involved?

If the ethics bit is small enough then Williams economic framework may be a close enough approximation that the benefit of losing the ethics might be useful. It is a question of how large is the ethics bit is and I doubt it is small. Also different people will make different decisions on what lose the ethics means such that it could well be more controversial rather than less. If it is more controversial then that would be a disadvantage of the analysis in addition to loss of the ethics utility bit distorting the analysis.

I don’t know where you are trying to go, but you seem to just be tying yourself in knots.

>>My final section established IMO that ethical considerations are relevant to the discount rate due to risk we use in economic models over long time periods (>> 20 years). This follows because without ethical considerations, the benefit or harm of future generations is of zero relevance to us.

>[But I’m not convinced by that. See comments elsewhere: infinite life vs infinite generations is arguably the same -W]

Infinite life vs infinite generations could in some circumstances be argued to be the same. For example I have invested in solar panels with guaranteed FIT for 25 years. If I may not live for over 15 years do I ignore last 10 years benefits?. My answer is no, on assumption that I can lease the roof space and panels to effectively sell the asset and still get at least same price for the house. (I do discount the cash flows and in reality the effect was that those last 10 years were unlikely to change the investment decision. However, if electricity prices are rising rapidly those 10 years might be important and a significant fraction of the investment cost.)

Contrast that situation with investment in making society more resilient to climate change in a way that does not create a sellable asset. Why would I value post death benefits if I am not going to be alive to see those benefits, unless ethics are involved?

If the ethics bit is small enough then Williams economic framework may be a close enough approximation that the benefit of losing the ethics might be useful. It is a question of how large is the ethics bit is and I doubt it is small. Also different people will make different decisions on what lose the ethics means such that it could well be more controversial rather than less. If it is more controversial then that would be a disadvantage of the analysis in addition to loss of the ethics utility bit distorting the analysis.

I don’t know where you are trying to go, but you seem to just be tying yourself in knots.

“[I Burrowed one. The bit where you failed to realise that SLR from GW might threaten Bangladesh -W]”

I am aware of the argument about sea level rise, but his time frame seemed rather off to me.

The point I was getting at was that the fertilizers they depend on require fossil fuels to produce. They can either stop using fossil fuels and starve now or they can continue using them and, perhaps, maybe, the sea level rise might eventually hurt them if they don’t start building levees to protect themselves.

The idea that they are innocent victims of fossil fuel use is inaccurate.

At the current rate of sea level rise I don’t think they’ll be in danger in “decades.”

This seems to be a big leap. Increased economic activity could simply be from more people; it could be from running harder to stand still; it could mask increased disparity between rich and poor.

[It could be. But past experience suggests not. As ever, the challenge is to find a better proxy -W]

What does it mean that my child will be “5x richer” than I am? When has that ever happened? I make less than my Dad did despite having a good education and job. My wife works, my mother did not. Who knows what will happen when my kids hit college age. Sure, we have a Wii and growing up we had Pong. Does that make me richer in any real sense?

[Not your child really. Those are numbers for 2100. But… how do you value a Wii? Or TV. Or computers. Or better medicine. I don’t know, but again I bet there are studies on how to do this -W]

As a long-time fan (and someone who took Chris Greene’s inaugaral climate economics course in the 90s) I have to say that this post and your ensuing comments are among the dumbest and poorly argued that I’ve ever seen. Hmmm….perhaps I’m being to blunt, but then again when in Rome :)

[Being blunt is fine. I suspect, though, that what you really mean is that you don’t like the conclusions (it is OK for me to be blunt too, isn’t it?) -W]

Rather than arguing from personal ignorance of the interface between ethics, economics and climate change, you might convince the rest of us if you provide some links to back up your position. A rebuttal of this work would be a good start.

[I’m not arguing from ignorance. I am however indicating where I’m ignorant. Would you prefer me to pretend to know it all? -W]

You can argue that economic strategies are more likely to succeed than strategies based on moral suasion. That is fundamentally a political question though, not a moral one. What you can’t argue, as you seem to be trying to do here, is that economics is somehow devoid of explicit and implicit assumptions that are fundamentally ethical/moral/subjective in nature.

[No, I’m not arguing that. I’m arguing that it has *less*. And that striving to remove politics, and the chances of political meddling, is good -W]

It is **impossible** to conduct an ethically neutral evaluation of climate policy. Using revealed preferences or willingness can help to provide some empirical support for various assumptions, but that doesn’t make the analysis value-free.

[Yes, I used to say things like that. Hopefully not anywhere that anyone will find it, nowadays. You can, if you like, very deliberately try to evaluate GW outside a cost-benefit framework. Which is what considering a species ugly chickens to have infinite value amounts to. But it gets you nowhere; you’re in a position where you have no basis for making any decisions, and different people have mutually incommensurable values and no way to reconcile them -W]

“Absent these concerns an investors ambition would be to go bankrupt on the day they die, which would significantly alter the discount rate of investment.

> [Yes. This is why your previous arguments about intergenerational ethics fail; people can be left to do those themselves -W]

[You’ve misread my reply. The comment above wasn’t a reply to the bit you quote, it was a reply to the previous sentence Nevertheless, investors typically have considerable concern for their progeny, and often for the continued well being of their company, both of which are ethical concern. It would make no sense as a reply to the bit you quote -W]

Society thrives because we are all at least a little bit ethical.

[Yes -W]

Based on this exchange, I suspect your position is not that ethics is irrelevant to policy responses to global warming (which appears to be the message of the main post), but rather that people’s ethical preferences are already included in a purely economic analysis, so that they do not need to be considered again as a separate issue. Certainly such a position has some merit. Assuming that that it is your position, however, I note that it fails on several grounds.

The first and most fundamental failure is that economic valuations (and hence the valuations in economic models) are not egalitarian. They are based on demand, which can be glossed as desire times purchasing power. Currently Somalians have a great desire for grain, but they do not have a great demand for grain (where “demand” is the technical term in economics) because they have little purchasing power. As a result, grain is fed to cattle to fatten them for Western tables while Somalians starve. That is certainly not because the Somalian’s preference to be fed is less than the Western preference for grain fed beef rather than grass fed beef.

So, to the extent that economic models already include ethical preferences, they included them on an income weighted basis. For any person who believes anything like the proposition that “… all men are created equal …”, that means the ethical evaluations expressed through economic activity are nothing like sufficient as a basis of ethical evaluation.

The second point is almost as important. It is that people do not act with perfect knowledge (contrary to the assumptions of economic theory). Indeed, not only do they not act with perfect knowledge, but corporations actively work to ensure imperfect knowledge. Nestle, for example, does not advertise on the sides of its products that “The purchase of this brand by Nestle was made possible by money obtained by selling low nutrition dairy products as infant formula resulting increased infant mortality in the third world.” Shell does not advertise on its bowsers that “This petroleum was made cheaper by devastating the lands of the Ogoni people, actions made possible by the forcible and sometimes lethal suppression of the Ogoni people by the Nigerian government, of which Shell has been aware and sometimes actively instigated.” Consequently purchasers of Nestle and/or Shell products cannot be presumed to be making an ethical choice about those actions. Therefore even though economic models include the consequences of those actions in their valuation of human life in the third world, that cannot be assumed to reflect the ethical choices of consumers.

Finally, people are imperfectly ethical. Consequently their actual choices only imperfectly reflect their ethical values. It follows that you cannot determine their ethical values solely by examining their actions, let alone the long term consequences of their actions as economic models do.

It follows from these three points that the ethical evaluations implicit in economic activity and outcomes, and hence as found in economic models, reflects the values of only a small subset of the population, and do so imperfectly because of both imperfect knowledge and ethical imperfection. Therefore, if the ethical dimension of an issue is important from the perspective of a particular ethic, then it must be discussed and allowed to influence policy independently from its limited influence implicit in economic models.

I have been on environmentalist blogs where enviro’s argued that we talk too much about science and economics. The thinking was that for environmentalists just the threat of AGW was enough to justify action. The immorality of AGW was the main reason why action should be taken.

I argued with varying success that to get things done to address AGW a lot non-environmentalists would have to be on board. To do that science and economics would be critical.

On the environmentalist blog Grist they have law & economics experts in guest posts argue for environmentalists to use economics more. These articles receive very little attention from the readers.

Your headline claim appears to be that “economics” can be used to deal with GHGs in an ethics-free manner, by “internalising” the costs.

Your critics, of which there appear to be many, observe that costs cannot be assigned without making some ethical judgement about how we value costs imposed on others. Especially, others who are several generations distant in time. Any discount factor seems to imply that we value them less, but how much less we should (and/or do) value them is certainly open to some debate.

As far as I can see, you have made no attempt to answer this criticism, merely stating that you don’t understand economics, but are nevertheless correct.

If I have missed something here, please feel free to point it out.

[You’ve missed everything of importance; as have the people making the criticism above. I’m arguing for addressing GW within an economic framework rather than an ethical one. A matter of “framing”, if you’re prepared to use that “framing”. The two aren’t wholly disjoint, but they strongly affect how you set about it and what you say. See the forbidden/taxed stuff at the start -W]

> You’ve missed everything of importance; as have the people making the criticism above. I’m arguing for addressing GW within an economic framework rather than an ethical one.

But this seems to be the point you are missing – the economic justification for short term action simply does not exist without ethical considerations.

[Missed again. Oh well, I’ll try again, but at some point I’ll get bored. An “economic framework” doesn’t preclude ethics. Just as, presumably, an “ethical framework” doesn’t preclude economics. It is a matter of what you consider most important, which aspects you will emphasise, and so on -W]

The pure economic solution to the current problem is for those who are experiencing direct negative effects from CO2 emissions to vote with their feet and use an alternative – and the competitive market will adjust cost accordingly.

[Wrong -W]

This fails because:

* Direct effects are vague and pretty well impossible to attribute right now
* The people that are most likely to be negatively impacted by emissions are not those making the emissions in the first place
* The people that are emitting may not have ready access to an alternative energy souce, or the cost of that alternative may put them at a competitive disadvantage

So a pure economic solution actively *prevents* action.

This is the whole point about raising the issue of an ethical frameork when talking about economic solutions. It is not about saying “we ought to do this anyway, because won’t someone please think of the children”. It is about recognising that ethics provides the only justification for applying a corrective factor to an economic system that cannot directly recognise the negative impacts of emissions.

If you continue to argue that this is not the case, you’re doomed to failure in trying to reach a solution palatable to all parties because different ethical systems would choose to provide different corrective factors to the economic framework (or none at all).

Indeed, this is precisely where trying to find common ground on taking action on CO2 emissions for economic reasons *always* falls down. Ultimately, everyone ends up arguing ethics without realising it – and without a common ethical basis for correcting the economic situation, no progress is made.

“I’m arguing for addressing GW within an economic framework rather than an ethical one. -W”

I agree. Like it or not, many ‘ordinary citizens’ just don’t give two hoots about starving Somalians or the drowning of Tuvalu. Sorry, they just don’t. Look at the tone of public comments from denialists which has switched in true fairweather friend style from “AGW detracts resources from aid to developing countries and is genocidal”, to “They’re all out with their begging bowls at Durban trying to lay a guilt trip on the struggling Western economies to get blank cheques wrtitten.” Challenging that kind of guff is like trying to convince a Manchester Utd. fan to cheer for Liverpool and build a shrine to Kenny Dalgleish, with about the same response. You’re framing the problem in a way that opens a can of worms that challenges everything from racial prejudice to national/regional/family/tribal financial priorities, although not explicitly stated 99.9% of the time.

However, hit them with EROEI comparisons of tidal range (115.9), compared to gas (3.5) and coal (5.5); Cairn coming up empty drilling in the Arctic Sea with a loss of $1 billion and a 6% drop in shares; the real cost of a gallon of petrol being $15; or US taxpayers paying up to half a trillion bucks cleaning up the mess left by coal … the tumbleweed blows. They often disappear, make shit up, or try to change the definition of economics.

Just to add, if I go anywhere in comments and say the likes of “Think of your grandchildren”, I’ll get laughed out or a mocking response of “I haven’t got any.” In fact, you’ll see a number of denialists use “Ooh, but think of the grandchildren” as an opening taunt.

I guess the point is that whilst economics appears to be amoral, in reality morality is implicit in the calculations.

For long term effects (AGW, for instance), the choice of discount rate is actually a moral one.

[I think you’ve stepped to quickly from “there is some morality (aka, human choice)” to “the choice of discount rate is actually a moral one”. The choice of discount rate is actually largely a matter of observation and experience -W]

A large discount rate implies not caring about future effects, or perhaps better put focussing on short term gain. A small discount rate implies putting a high price on future effects.

I first note that “framing” of an issue only changes the way you talk about a topic, not the facts that need to be discussed. If ethical issues are involved , as they are, framing the debates as a economics issue just means you need to frame ethical issues in terms of discount rates. It does not mean you avoid the issues.

Second, I’ll believe your framing without reference to ethics is correct when you present me with a widely accepted economic study showing an 8% discount rate but concluding global emissions must effectively peak by 2020 and end by 2050 (which is what is required). Good luck on your search.

[But… but… if you already know the answer (and you seem to: “global emissions must effectively peak by 2020 and end by 2050″) then there is no need to invoke economics (or indeed morality) because you Know You Are Right. You haven’t told me how you arrived at this answer – what criteria your solution matches – perhaps because you assume we share so much context that it doesn’t matter. But it does -W]

Can you explain what you think an ethics-free economic framework might consist of? Assuming you fail to come up with one, how can you set an economic framework as an alternative to an ethical one?

You clearly stated that (in your view) intergenerational moral issue was not relevant to economics. How do you think economics manages to address intergenerational equity?

Ownership of assets “just cascades” but their net present value depends on how you discount them. This is precisely the way in which economics addresses the intergenerational issue. Just because it is (sometimes) dressed up in supposedly authoritative-looking numbers doesn’t make it go away, it just means some economist has imposed their decision.

Whether your ‘ethic-less economics’ is tied up in knots is quite possibly a mere irrelevant side issue. To return to what you were explicit about the purpose of this post, you said

“So I’ll be more explicit, here, and argue for solving GHG emissions as a matter of economics, to be handled by taxation, rather than as a matter of morality”

Why so specifically taxation? I would be more inclined to say lets internalise the externalities as a good first step and work out whether we need to go further and introduce some method of pricing/taxing/internalising further ethical considerations later.

[Because taxation is the obvious method for int-exts -W]

Fossil fuels have no cost to mining companies and this is a travesty. Yes, there are extraction costs and permission and land reinstatement costs but using them should also carry, as an absolute minimum, the full costs of the CO2 climate impacts. Land reinstatement costs are already an effect of internalising an extenality of dammage to the environment, I see no clamour to remove that so we should do a more complete job of internalising externalities.

[I’m not sure what you mean by mining companies – I can’t imagine you meant gold mining, for example. And I can’t see drilling for oil as mining. So I’ll assume you meant “fossil fuel extraction companies”. In which case: yes, taxing the extraction at source would certainly be one way of imposing the tax. Tricky at the moment, though – good luck in persuading the Saudis -W]

This may not go far enough. These resources might be more valuable to future generations so ethically (even economically) we should internalise an estimate of the potential lost opportunity cost. But lets leave this ethics for later (assuming it is necessary) and as a first step internalise full costs of CO2 climate impacts.

Obviously you need to back this up with fines/taxation for any failure on the company’s part to sequestrate sufficient carbon.

So, why are you leading on taxation and ethic-less economics rather than saying lets do a more complete job of internalising externalities and worry about further ethical issues later?

I’d be interested to hear what experience and what observations you refer to.

AFAIK (which is not very much) the discount rate chosen is entirely subjective, down to the relative return expected from alternatives (ie economic growth in this context), the degree of certainty etc.

This is at least partly a moral choice; choosing a large discount rate effectively means ignoring effects distant into the future, or to put it more emotively, selling out our grandchildren’s future.

But I should really read more background on the exact calculations done.

[I’m talking about the discount rates businesses and governments already use. There are long-term ones in there, too. Probably not 100 year ones, but likely 50 years -W]

We should distinguish adopting economic reasoning from adopting the currently prevalent notion about discount rate (which partially overlap the notion that economic growth is desirable).

I think that several different issues are conflated in the concept of discount rate.
(1) interest rate (in financial sense).
(2) interest rate in another sense, i.e. we are less interested in the future than in the present.
(3) expected economic growth rate as the background.

The item (2) is based on human nature and we cannot deny it, though its quantity is likely very different from person to person.

As for (3), it is an illusion that the growth rate is guaranteed to be positive. Even if there is no failure of policy, natural disasters may ruin the economy. So, if it is the rationale of discount rate, we should allow the possibility for it to become negative.

[I agree that growth is not guaranteed. However, there is a very important point: that the harms we expect from CO2 will only occur if there is significant growth. To some degree of accuracy, CO2 growth is tied to economic growth. We only have to worry about the CO2 if the econ growth occurs -W]

As for (1), I think charging interest is good as economic incentive within a generation, perhaps because it balances the natural preference between present values and future values (item (2) here). But when inherited between generations, it often becomes umbearable. It is obviously absurd to inherit debts over one thousand years. Traditional societies knew that and devised mechanisms to resolve debts. Islamic society outlawed charging interests. Ancient jewish society had a “jubilee” once in 50 years. Medieval Japanese society had “tokusei-rei” when the political leadership changed. Nowadays the economy is mainly run by corporations which does not natural lifetimes, so interests can accumulate indefinitely, but if we do not restrict the accumulation, inequality between economic entities also accumulates.

I do not think that the interest rate is something essential for the economy, but just a tool to facilitate economic activities.

[There is an interesting asymmetry in the case of personal inheritance: you can inherit goods (obviously; possibly subject to some death-duties tax) but you can’t inherit overall debts -W]

{In which case: yes, taxing the extraction at source would certainly be one way of imposing the tax. Tricky at the moment, though – good luck in persuading the Saudis -W}

Yes, I meant fossil fuel extraction companies and yes taxing the extraction at source would indeed be one way of imposing the tax. But it isn’t the only way of internalising externalities and why prescribe one way, tax, rather than allowing different ways in different circumstances.

Land reinstatement is not done through taxation the requirement to reinstate is imposed on the company doing the damage as a condition of getting permission to extract. It makes sense to impose it on the company because they are already doing work on site so taxing and government running a land reinstatement industry is less efficient.

[But that doesn’t work when the harm is diffuse, as in GW, so that is out. That is obvious, some I’m puzzled why you mention it -W]

The case for imposing condition to sequestrate on companies rather than tax is perhaps less clear cut. It may or may not be cheaper to sequestrate at site where ff is burned and air has high co2 concentration. So why not a mix and match regime to allow cheapest cost? i.e. where you impose the condition to sequestrate on the supply chain/source (see * below). The extraction company has four choices: 1. Sell to power company with CCS and get credit partially covering requirment to sequestrate. Such customers get lower price but have costs involved. 2. Sell elsewhere at higher price and do some sequestration. 3. Pay for the sequestration (probably to whoever is offering cheapest price). or 4. Pay the taxes/fines for failure to meet requirement to sequestrate.

[So why not a mix and match regime to allow cheapest cost? – precisely. This is why taxation (of CO2 emitted) is correct, and imposing sequestration is wrong. Companies get the choice to either pay their tax, or sequestrate, as they choose. So my method is a better superset of your method, and simpler too -W]

Doesn’t this allow cheapest cost rather than impose tax and have government running large sequestration industry sector quite possible less efficiently than industry. So I don’t see why you claim taxation is obvious choise.

>”good luck in persuading the Saudis”
Yes and there are powerful industry lobbies as well as Saudis. Should we ignore lobby groups do it ourselves anyway and become much more dependant on foreign countries for power sources?

Probably not. I am suggest we need a reasonably high level of worldwide support to internalise the externalities through a requirement to be phased in starting in a few years time to sequestrate carbon. As you say this probably wouldn’t get Saudi support. However is unaniminity required? The reasonably high level of worldwide support is needed to allow trade tariffs on countries that don’t implement it to be imposed on imputed carbon cost of goods as the bunny argues.

So if China doesn’t join in, the goods it exports are taxed and it is only domestic consumption that is leakage. If the Saudis don’t join in, is pretty unimportant. Whether they do or don’t, * oil imports are treated as the start of (or maybe part way through) a supply chain and the importing company gets credits for any sequestration the exporting company has in its supply chain and if this isn’t incredibly high, the importing company has requirement to sequestrate to meet.

The industry lobby will not want costs in any event and definitely wouldn’t want to compete against companies without the costs. If there are large industry closures as they cannot compete against foreign companies without the cost the lobby has a powerful case. If the trade tariffs on imputed CO2 costs can be done reasonably then this powerful case disappears and it should be possible to ignore the lobby unless you believe politicians are irretrievable in the pockets of industry. Yes the lobby is still a problem to be overcome.

Your ‘tax is best’ gives the choice of consume and face the costs or don’t consume. My int. ext.s gives a 3 way choice of consume and face the costs, or don’t consume, or consume and sequestrate to put things right. Why shouldn’t this third option be allowed?

Secondly, it sounds as though you don’t fully understand how discount rates are decided on either. Perhaps someone else here could point a link? Until I see something to the contrary I’m of the view that the choice of discount rate *is* at least to some extent a moral choice; it implies a choice of how valuable the future is compared to the present and therefore to what extent we are blighting future generations. It may be quantitatively expressed economically, but qualitatively it’s moral.

An analogy is health economics, where NICE makes an explicit judgement on the value of human life (or QALY). This may be couched in economic terms, but it expresses a moral judgement.

Thirdly: [I agree that growth is not guaranteed. However, there is a very important point: that the harms we expect from CO2 will only occur if there is significant growth. To some degree of accuracy, CO2 growth is tied to economic growth. We only have to worry about the CO2 if the econ growth occurs -W]
is I think completely wrong. It’s easy to postulate a future where an ever harder search for fossil fuels (tar sands, Arctic exploration, coal to liquids conversion…) results in ever higher CO2 emissions per unit energy and therefore more CO2 regardless of growth.

Finally Eli @75 – much as I generally enjoy the delphic utterances of the lagomorphs I’m totally flummoxed by this one…

When working out the costs of climate change there are many things that are a bit of a subjective judgement and will depend on people’s values , political beliefs, etc. I can see that, e.g. what is the ‘cost’ of loss of an ecosystem. Different people will come up with different costs, and criticise each others valuations, and use devices like the ‘value of a life’ as TimW mentioned above and do various ‘sanity checks’ to come up with a range of values – fine.

Also, similarly people can argue about discount rates, and again this will be somewhat subjective depending on, for example how we value the future compared to the present. Again, people can do sanity checks and use analogies to justify a figure.

From all of this we will eventually get a range of values for a carbon tax. But the beauty of the carbon tax to me is that it cause the market to target the areas where there is burning of carbon for little value and where alternatives exist but still allow fossil fuel use for areas where it is really adding value. This is where I think a more rigid government ‘picking winners’ approach will have a much more damaging economic impact than necessary and end up doing quite serious harm by denying economic growth

> {So why not a mix and match regime to allow cheapest cost? – precisely. This is why taxation (of CO2 emitted) is correct, and imposing sequestration is wrong. Companies get the choice to either pay their tax, or sequestrate}

OK now you are clear that you are taxing emissions net of sequestrations [That is so much a given in this kind of discussion that I didn’t bother mention it, sorry -W] not just taxing emissions you may well be right the tax system could be more efficient way of getting to the same end. It may be simpler than mandating sequestration with option for tax instead but not as simple as just taxing emissions.

So changing tack completely:
If you think sequestrations are going to be necessary in the future there is the question of how quickly/suddenly we can ramp up the level to which it is done. If tax is cheaper than sequestration and practically no sequestration
is actually done. How does this help us prepare to ramp up the sequestration level? At some point your tax is changed to exceed the sequestration cost and there is a mad chaotic dash for sequestration.

Consequently, is there a case for mandating increasing levels of sequestration rather than the mad chaotic dash?

[That assumes sequestration has a fixed cost. But like all these things, there will be a range of costs. As you raise the cost of emitting, more sequestration becomes viable.

I think several things are important: to get the basic tax infrastructure in place (at whatever level, probably quite low) so people get used to it. To transparently use the carbon tax to reduce other taxes – not to simply use it as an extra tax (so the people are happy). And to create a long-term plan to increase it in a reasonably stable manner, so that people can plan ahead – sequestration needs research, demo plants, etc, all with long leads, and that can’t happen unless people know it will become viable -W]

Incorrect conclusions arise from false premises. Imposition of a tax is not an economic solution. It is a political one. If you want an economic solution you must participate in the market rather than try to influence it from the outside. Figure out a way to make mitigation a product.

I’ve had a few experiences using a discount rate to calculate net present value for projects I was trying to promote. The discount rates used only reflected economic concerns — interest rates, inflation, etc. The time frames considered were typically 20 years. See Wikipedia for an explanation of “net present value” http://en.wikipedia.org/wiki/Net_present_value.

So I don’t agree that economics automatically includes an ethical choice. Except as much as excluding ethics is an ethical choice. As far as I can see a discount rate is picked for purely economic reasons which boil down to “Is this a good use for my money?”

As far as I can see, companies will only consider economics (their bottom line) unless forced otherwise. Governments are similar, with the added twist that often it is politicians only considering their bottom line (will they get re-elected, or will they get hired as expensive lobbyists once out of office).

National Park Service Organic Act, 16 U.S.C.1. (1916)“…which purpose is to conserve the scenery and the natural and historic objects and the wild life therein and to provide for the enjoyment of the same in such manner and by such means as will leave them unimpaired for the enjoyment of future generations.”

crandles — For a company, I don’t believe ethics comes into discounts rates and investment except for the ethic that the company should make profit. That is an ethic, but I think that is far removed from any “ethical” consideration of others outside of shareholders. Isn’t that the kind of ethics being discussed?

Now consider something like the Stern report. What are the ethics involved in the calculations? Is it simply the ethic “best return on investment”? In your example above, if I am making the calculation for project two, and I will not bear the costs of failure, why would I put the -$10^14 into my calculation?

The Stern report used a much lower discount rate than normal which can be criticised as ethical decision that other people may not agree with.

So you seem to see project 2 as a possible get-rich-quick scheme not a foolishly risky one. Is that an ethical decision?

The $10^14 was calculated as 7 billion human lives worth a little over a million each then take 1% of that. If you prefer that project you are willing to risk the equivalent of 1% of human population being killed for the sake of being able to take up a get rich quick scheme. Is this an ethical decision or not?

The example is extreme. You don’t seem to have answered how you build in risk into the DCF calculation and isn’t this where the ethics come in?

The ethics in the Stern report, as many of us have already alluded to, is in the choice of discount rate, which determines how much we care about future generations. It seems the confusion our host (and some others) is showing is primarily in this matter. Where do you think a 100y discount rate actually comes from?

[The Stern report was widely criticised for using an implausibly low discount rate (deliberately, in order to fixup the costs), and yes I think this was done for reasons of morality. That doesn’t demonstrate that other discount rates are moral, of course -W]

Gator, re Stern report. A very low discount rate was used. As W said report was criticised for it. That low rate is an ethical choice even if backed up by reasoning for it. Changing the low rate to an investment rate would AIUI reverse the way the calculations came out so it is a critical decision as well as being an ethical one.

>”and I will not bear the costs of failure, why would I put the -$10^14 into my calculation?”

This appears to view project 2 as a get-rich-quick scheme rather than a foolishly risky one.

I created $10^14 as world population of 7 billion worth a litle over a $million each then took 1%. So if anyone prefers project 2 they are saying they are willing to take the 50% risk of the equivalent of 1% of world population being killed for an equal chance of becoming very rich. That is an ethical question if ever I saw one. OK the example is rather extreme and I am not sure if that is good or bad way of making the point that ethical considerations mainly become incorporated into a DCF in the way they deal with risk.

You don’t seem to have said how you incorporate risk into your calculations.

Perhaps more interesting is to what extent it should be risk adjusted interest rate? If markets do price systematic risks into prices of bonds is that objective evidence that we should do the same. So cash flows from projections without mitigating action to reduce risk should be heavily discounted while projected cash flows where we are undertaking emission reductions shouldn’t be discounted as heavily.

This can be viewed as equivalent to using a low discount rate. So while the low discount in Stern can be criticised, it can also be defended on reasoning that can be claimed to be objectively based on market pricing rules rather than just being an ethical decision.

[The Stern report was widely criticised for using an implausibly low discount rate (deliberately, in order to fixup the costs), and yes I think this was done for reasons of morality. That doesn’t demonstrate that other discount rates are moral, of course -W]

It is in this you miss the point. Even the mostly used discount rate is derived from moral/ethics. Why? because we do not know much about the future so we have to guess and try to value the possible likely hod of things and costs and benefits and so on… this is impossible without moral thoughts.http://en.wikipedia.org/wiki/Morality

[Only in the trivial sense that all human activity inevitably involves ethics in some way. It would be far more accurate to say that the setting of discount rates, and the very closely allied interest rates, is almost entirely non-ethically based, based on experience, state of markets, likely returns, perceived risk, etc etc -W]

Ah. So you’re arguing that because ethical considerations are not taken into account, it is not an ethical issue.

That’s trivially proven wrong – just because a motorist *does* not consider ethical issues when deciding how fast to drive home (they rather consider personal convenience etc) does not mean that they are not making a decision with ethical implications (their convenience may kill a cyclist) or that they *should* not consider the ethical dimension to their decision.

In the same way, when considering the economics of climate change, whether or not we *do* take into account ethics when setting a discount rate does not dictate whether or not we *should*, and omitting to mention it does not make the issue disappear.

>”Do we need to extrapolate? Ideally, discount rates would not depend on timeframe”

Ideally in theory yes, but in practice, what if rates on 10 and 20 year bonds are different? Do you assume this is related to risk or the timeframe or just random noise? If we assume risk or timeframe, does the difference in risk mean this will apply 9 times as much for 100 years or more than 9 times? Perhaps we need to look at 3 different length bonds say 10, 20 and 30 year bonds in order to extrapolate up if the rates are noticable different. If the rates are not different then I accept that we don’t need to extrapolate up.

.

>”It would be far more accurate to say that the setting of discount rates, and the very closely allied interest rates, is almost entirely non-ethically based”

A market price is a sort of average across everybody in the market but it weights the views of weathy participants much more heavily than a democratic one person one vote system would. So isn’t it an ethical choice to decide to accept the market price average rather than a democratic average?

[I think its obvious that using the democratic version is an ethical choice. It isn’t clear that the market-based method is, except weakly -W]

So perhaps the choice of discount rate using market rates can be considered to be both a more objective choice than a single person’s subjective choice and also an ethical choice.

>”Do we need to extrapolate? Ideally, discount rates would not depend on timeframe”

Ideally in theory yes, but in practice, what if rates on 10 and 20 year bonds are different? Do you assume this is related to risk or the timeframe or just random noise? If we assume risk or timeframe, does the difference in risk mean this will apply 9 times as much for 100 years or more than 9 times? Perhaps we need to look at 3 different length bonds say 10, 20 and 30 year bonds in order to extrapolate up if the rates are noticable different. If the rates are not different then I accept that we don’t need to extrapolate up.

.

>”It would be far more accurate to say that the setting of discount rates, and the very closely allied interest rates, is almost entirely non-ethically based”

A market price is a sort of average across everybody in the market but it weights the views of weathy participants much more heavily than a democratic one person one vote system would. So isn’t it an ethical choice to decide to accept the market price average rather than a democratic average?

So perhaps the choice of discount rate using market rates can be considered to be both a more objective choice than a single person’s subjective choice and also an ethical choice.

Of course there are people who would take a chance to get a huge payout with zero risk if others will bear the cost. Does “too big to fail” sound familiar?

So even if economic decisions have ethical consequences built into them this does not mean that those decisions are being made ethically. Well, they are, but the ethics used are likely “best for me and my shareholders.”

I think this is why saying ecomomics contains ethics misses the point. The ethics contained do not include consideration of others outside of the investors. But this is also why saying economics alone will handle AGW is wrong. It is wrong because our economics does not contain people outside of investors, does not handle diffuse costs and has no way to value the environment and quality of life. We can tack these on using models and ideas that are partly economic and partly based on ethics. But this will always be a political fight to include these non-strictly economic factors.

The idea of putting a price on an externality using taxes assumes that there is a reasonable basis for computing the impact. In this case it would seem to be more reasonable to assume that we need to control the level of emissions down towards some very small fraction of today’s output. So I actually think that some kind of global allowance decreasing to the “allowable” level would be the right answer. This would have to be traded in order to set the appropriate price.

[I’m strongly against that approach, for reasons given in Carbon tax now. In particular, see the para beginning “There is a fundamental difference between carbon taxes and permits”. I think there is a “reasonable” basis for calculating the tax, and also think that (for reasons explained in this post) that we should start the tax below this level. It isn’t necessary that the tax be set at the correct level -W]

The goal would need to be lower global emissions of CO2 by more than 80% within 50 years. And you can’t have most of that just in the last five years. Of course if we put this into place, and the toll was too high in terms of other impacts then we would need to adjust.

In the case of acid rain it turned out to be not very expensive at all to bring the output into the desired range. I’m not sure what would happen in this case if such a regime were in place for CO2.

It also seems to me that the idea of offsets is too squishy so we ought to have a single figure for emissions. There should be a separate limitation on removing forest. Over time this shouldn’t be allowed so the price to remove an acre of forest would become prohibitive.

Of course we lack the global government to make this possible, but that is what I would want if such a thing existed.

So the proposition is: Based on the (not only understood by the few who have special knowledge or interest) concept of internalizing externalities, we should impose a tax that we can’t quite say a) the amount b) who pays c) who collects or d) what happens to the money.

It is hoped this tax, combined in some way with a yet to be determined discount rate, will over time be beneficial to climate.

[I think you’ve misunderstood. The tax isn’t combined with the discount rate. The discount rate (together with much else) is needed to know a correct level to set the tax at -W]

So to alleviate suffering in Bangladesh for one person – if my rate of return was 1%, I would have to invest 17.6m…or if 10%, 19k.

The discount rate is very important. But, over a span of more than about 10 years, economics does not help you. There is no objective answer available. 100 years ago, there were some very bright people around – Curie, Bohr, Rutherford, Planck, Einstein – did any of them foretell the phasing out of horse emissions of manure in favour of the internal combustion engine?

It comes down to ethics. Economics gives you a conceptual framework – if you do this, then such might happen. It can help to objectify subjective questions – such as the value of a human life. However, at base, it asks how best do we apply our scarce resources. “Best” is the difficult term here…what does “best” mean…whgich is why Tim W talks about “utility”. What is most valuabloe to us as a society?

At the moment, I nould suggest that there are more useful ways of investing 17m currency units than in preventing a flood in Bangladesh in 80 years time.

“So, if I ask the folks, how much would Tim Worstall’s valuation of a himan life be worth in 80 years’ time assuming 2% annual inflation…who would know the answer?”
Look up compound interest, it’s pretty easy to calculate. You should come up with a number a bit less than 5x current value.

The deeper question is “worth” — in inflation adjusted dollars, that calculation is just that a human life is worth the same now as it will be 80 years in the future. But if we are all 5x richer in the future, shouldn’t a human life be worth 5x more? On the other hand, when the human population tops 10 billion 80 years from now who’s to say a life won’t be worth less? Tim W.’s calculation was based on how much money it takes to get someone to do a dangerous job. If the median population is poorer, it should take less money to get people to do risky things.

In long term you have events like discovery of usefulness of oil/industrial revolution making enterprise more profitable or discovery that we cannot keep using them without creating significant costs. Widespread easy and cheap transport allowing increased competition. There are lots of issues affecting supply and demand to borrow money which determines the price=interest rate. Predicting them in advance may be hard but the larger ones like mentioned above might have some predictability even if imperfectly.

>{I think its obvious that using the democratic version is an ethical choice. It isn’t clear that the market-based method is, except weakly -W}

If there is one question with a range of answers and you accept than some of the answers are ethical, is the question ethical or not. I think your answer demonstates you have dug your heels/claws in and I don’t see much point continuing on that theme.

The bit about the inhalers is that there was a switch over from CFC to HFC starting in 2008 and the HFC inhaler was still under patent. This ended in 2010 so generic availability will lower the cost. There is also the issue of prescription vs. not. Your not so free market at work or not. Has nothing to do with the cost of the medicine and everything to do with the profits of the drug companies.

@Eli “This ended in 2010 so generic availability will lower the cost.”

I bought an albuterol inhaler just last month and it was about $40 ($45 I think) and they certainly don’t work as well as the older ones. My asthma isn’t very bad so I don’t need to use it much, but for someone who went through one inhaler a month that would be almost an extra $500 a year – hardly insignificant.

I can’t wait for those cheap generics to come online – it has been 3 years with this expensive junk.

Alternatively, they could’ve waited to ban the CFC inhalers after the HFA patents expired. Of course, how long until they ban HFAs? My guess is when there is a patented (expensive) replacement.

Similarly, nylon was competing with hemp and it got banned – guess what the Secretary of the Treasury at the time was heavily invested in?

DuPont – the inventor of nylon.

Dupont, of course, has benefited from the CFC ban as well.

Screwing with medicine, both hemp (cannabis) and inhalers, is criminal.

It seems to me that your previous post was in reference to things like the European scheme. This is a partial system, since CO2 not output in Europe can be output somewhere else defeating the purpose. In that case I agree that a tax is better, although probably not that useful.

My comment was in the case of a closed system like the entire Earth. In that case there is a clear amount of Co2 that should be targeted and a trading system is the right way to allocate that amount. I mean what is the point of imposing a tax if it isn’t to limit the emissions to an acceptable level?

Imagine a lake with a limited amount of fish production. You can’t just impose an arbitrary tax and hope that all the fish won’t be wiped out. Instead you have to set a maximum take on fish and then allocate it. The best way to allocate is to trade.

[In the case of fish I might agree, but we’re talking about something very different. My previous post was general and does not just apply to the EU scheme. You say “there is a clear amount of Co2 that should be targeted” but I don’t think that is true. We need to reduce our emissions, certainly, or at the very least get off the exponential growth path, but by quite how much isn’t clear.

“what is the point of imposing a tax if it isn’t to limit the emissions to an acceptable level?” – well, that is the entire point, which I’d hoped was explained there. Suppose we believe the cost-benefit stuff. Then, in theory, we can set the tax at such a level that the external costs of emitting CO2 are exactly matched by the benefits (I agree that we are not close to being able to do this, and it also somewhat assumes linear costs). People would then be free to emit, or not, based on their preferences rather than on their/the world’s governments preferences -W]

[Only in the trivial sense that all human activity inevitably involves ethics in some way. It would be far more accurate to say that the setting of discount rates, and the very closely allied interest rates, is almost entirely non-ethically based, based on experience, state of markets, likely returns, perceived risk, etc etc -W]

What is trivial to some is not to others… Moral and ethics change over time. Remember the slaves? So it is based on morals and you will have to argue out of moral either way you go… you could say it is trivial for you but it is still moral.

I think I see where our disconnect is. I am assuming that there isn’t a price that equals the cost since there is no reasonable way to mitigate. I guess if there was a scheme for removing CO2 from the atmosphere you could charge that amount.

[I guess it could be like that, if the costs exceeded the benefits. But AFAIK that isn’t the current view – see, e.g., the Stern report. Things like, say, species going extinct don’t count highly enough -W]

Depends on how you define slavery, it’s hardly a memory, even in its most restricted definition. Sure, not as bad as the 45% (?) of the American population in the 19th Century (classed as modern slavery), or 40% in the Roman Empire, but not brilliant either.

Debt bondage, serfdom, servile marriage, exploitation of children and adolescents. An estimated 250 million child workers aged 5-14 alone (excluding domestic labour), and an estimated 4 million people traded each year against their will. What do we really know about the clothes we wear, the sugar in our coffee, the chocolate we eat, or the kid at the fast food joint?

I believe even wage labour is a fairly modern concept. Lincoln saw the only difference between a slave and a wage labourer as the latter having more chance of working for themselves later on, and neither he nor the Republicans are on record disagreeing with the term ‘wage slave’ which was a much debated term at the time. Ancient Egyptian slaves in a number of periods could only become such by entering into a formal contract. If part of the definition of slave is one who is only allowed to travel a certain distance from the land they belong to, how far can the modern waged travel between clocking off and clocking on?

@J Bowers I have read that and I reject it. It is not clear that CFC’s have had a significant effect on the ozone holes – much less CFC’s from a source as small as inhalers.

The HFA inhalers get clogged easily and if you don’t notice then you are stuck having to screw around with them while you can barely breathe. It is also much more difficult to tell if your inhaler is empty since the propellant is so weak you can’t feel or hear any spray.

While my attacks are rare they are relatively acute – having to fiddle with an expensive inhaler that isn’t as reliable and which doesn’t give feedback that it is working is not fun activity during an asthma attack.

In any case, if you think the government is a reliable source of information, rather than a justifier of their own idiotic policies, then explain why marijuana and LSD are classified as schedule 1 drugs.

@J Bowers “how far can the modern waged travel between clocking off and clocking on?”

On a weekend they could fly to the other side of the world, have fun for a few hours and then fly back.

“An estimated 250 million child workers aged 5-14 alone”

They banned child labor in Thailand and a large portion of them turned to prostitution. They and their families still needed to eat – if they couldn’t get money from the sweatshops then they got it from the brothels.

Clean them more often, it’s your respiratory system. It’s not like the FDA and medical professionals haven’t pointed this out. I’m eternally grateful, though, for your elbow grease contributing to the retaining of more of our diminished ozone layer, whether you think that’s the case or not.

There’s no evidence that I can find for the banning of child labour causing an increase in child prostitution in Thailand. With a booming economy, increased disposable and reliable income in both cities and rural communities has led to an increase in demand for not only child prostitutes but adults, too. My last word on it.

How the hell can you set a value on the disappearance of a species when you don’t have a complete description about its role in the ecology

I’d associate a very high cost with ecosystem impacts, and I agree, there is a risk we may miss some impacts that nobody expected or warned of. But the alternative to not setting a value is that you protect something irrespective of the economic damage – and that seems even less sensible to me.

Let’s see, so for impacts Manzi mentions only the increase of global average temps by 2100? Off the rails, entirely, right at the start. Try circulation changes or maybe ocean acidification instead if you’re going to pick just one (and even then why just one?), and of course we kinda do care if we’re on a sharp transient as of 2100, don’t we? Also, the AR4 was already rather long in the tooth when he wrote that, science having marched on as it is wont to do.

[I think you need to re-read him. He is explicitly referencing the impacts calculations and costs that Stern provides, which is not just temperature -W]

So more complete waste of time than well worth it, I’m afraid.

You seem to be slipping, William. What’s the deal with this recent fascination with libertarianism?

[Certainly there is. But if you are talking about “value” that cannot be reduced to financial terms, then it can’t be included in economic calculations (but things like the “value” of beautiful scenery don’t come into this category). In that case, we can either ignore it for economic purposes, declare the economic calculations in principle invalid, or fake in the value -W]

OK, William, I’ll give the rest a more careful read, but that opening blatant straw-man doesn’t give me much hope that he won’t pull the same thing later. But even if he stays on the rails Stern-wise, that begs the further question of whether Stern got it right. Lots of people, me included, think Stern erred way on the low side.

[On the economics, Stern errs on the high side, see me for example. You might argue that he doesn’t include all likely impacts; I can’t say -W]

It probably is the job change, plus getting older, plus kids getting closer to a need for expensive education. As Robert Palmer once said about another basic human impulse, “You like to think that you’re immune to the stuff…”

Absolutely – I agree – it seems to me a similar situation where we effectively put a value on people’s life for healthcare purposes – where the benefit of an expensive treatment is sometimes too small to justify the cost (This sort of ‘healthcare rationing’ is a continuous source of debate in the UK)

There seems three possible ways of approaching this

1) Ban any activities that have a severe detrimental effect on the planet, ecosystems, habitats, irrespective of the cost of doing this
2) Try to balance the cost of the damage done against the economic benefits (I think this means we need to come up with a monetary value for these environmental impacts – I would genuinely argue that these should be set very high)
3) Ignore the impacts

We seem to be doing 3) at the minute, 2) seems the most sensible.

Steve , I don’t really consider this a ‘right wing position’ – I thought it was pretty mainstream – certainly the Stern report was commissioned by a UK Labour government – centre left.

Re {Update: an important question in all of this is, do the gains from CO2 production outweigh the losses? Or, said another way, Are we producing negative wealth?. This was a question I asked yeeeaaarrrsss ago in sci.env, and got no answer. The link points to a paper which suggests that in some cases the answer is that the losses are larger. I don’t know if it is correct.}

The paper is using marginal damages and they acknowledge that the external damages being greater than value added does not mean industry should be shut down, instead it is more likely that regulated levels of pollution are too high.

Reducing permitted pollution levels in these cases would likely increase prices and reduce demand thereby cutting size of industry rather than shutting it down.

.

(Maybe it is merely splitting hairs to suggest it more a case of saying we are consuming too much for the net wealth generated rather than creating negative wealth.)

[On the economics, Stern errs on the high side, see me for example. You might argue that he doesn’t include all likely impacts; I can’t say -W]

Sure you can, and for a reason you know very well. The hits just keep on comin’, don’t they? (E.g., recent projections of permafrost emissions, quite bad enough albeit almost certainly lowballed; the list seems to lengthen before my eyes as I peruse the AGU fall meeting abstracts and posters). Eventually, after we’ve more or less fully characterized the climate system, they’ll stop, but I hold not my breath waiting for that to happen.

Given the inevitability of more nasty surprises, I’ve never found debating the details of an economic projection that assumes otherwise to be all that interesting.

[Kids are already there -W]

Sorry, as it’s never been an issue for me the massive increase in cost of a tip-top primary/secondary education (heck, try Manhattan Upper East Side pre-school) had entirely slipped my mind. Hopefully it will pay off for you.

PeteB, I don’t think I said “right-wing,” although there’s an argument for it based on the severely off-kilter location of the current political “center” (in the rich countries formerly known as the First World, anyway), itself arguably a consequence of living high off the resource hog for so long. That’s a different, albeit related, discussion, but I will note that many who are more informed about British politics than I argue that there was very little “centre left” about that government, indeed that no longer being (and being perceived as) “centre left” was the whole point of New Labor.

BTW, Wiiliam, I suppose I should blame you for the oh-so-easy-to-click Judy reference above, which caused me to go look, which caused me to be very sorry, but man oh mann how the formerly mighty have fallen. What a cesspool, notwithstanding the efforts of a few doughty souls to clean it up.

My day already ruined, that inspired me to go have a look at Lucia’s comments, and not only they have they declined in quality, Lucia herself seems to be be letting her slip show more than usual.

The false premise is that the idea of a determinable discount rate is anything more than an elegant construction. The incorrect conclusion is making determining the non determinable discount rate a prerequisite for deciding the rate of the proposed tax. The only prerequisite for a carbon tax should be an availability of payers. You can’t have a tax unless somebody pays.

Once you’ve identified on whom the tax will be levied, you need to specify the purpose of the tax. Here, it is to influence markets and behavior. If the tax is government imposed, politicians will set the tax at whatever the traffic will bear. Then there’s the structure for collection and disbursement.

Most reading this have already made their calculation of the above criteria, yet no one seems quite able to put the right figure on it. If a figure ever be found, add the time and probability of enactment to the equation. Now, compare to the need for immediate action. Folks, we have a conundrum.

Costanza in 1997 (?) wrote a good paper about it. I think the value of ecosystem services was larger than the formal economy. More recently, a measure called GPI attempts to include some of these services and that measure may not be growing at all.

I think i disagree with our gracious host in that valuing possible futures seems to me an ethical issue. If he is arguing that ethical valuations can be incorporated into the economic analysis, i think i still disagree, multidimensional normative considerations are not easily integrated into scalars such as GDP or GPI, and they do not degrade into the future as simply as the notion of a discount rate implies. But perhaps someone here might educate me, if a more sophisticated approach exists.

Also, I cannot see how to weigh the harm caused by the loss of species. Especially extending the comment by Prof. Rabbett, we do not even know most of the thousands of organisms in a teaspoonful of garden soil, not to speak of their ecological role, and we do not even know which ones we destroy daily, or what they did. I suggest that the risks are masked by our ignorance, and are far larger than most suppose, and the damage is greater than an economic analysis would capture. A world without nightingales is not merely poorer by the amount that the the population of that world might pay to preserve nightingales.

[If you are effectively refusing to lose any species, then you are forbidding climate change. In which case, you need to decide what limit to put on T change to prevent all species loss. That too is a hard question, but I’m pretty sure we’ll exceed it. If you really believed it, of course, you’d need to forbid rainforest removal, too, which would be nice but hasn’t happened. Probably deforestation in mid-latitudes too, but its too late for that -W]

WMC may be right in that only an economic argument will succeed in persuading the world to curb fossil emissions. But i think that other viewpoints will have their place.

“Climate Policy Initiative Analysis Finds U.S. Building Energy Codes Work
September 7, 2011

SAN FRANCISCO, CALIFORNIA — In the first U.S. study to measure the real impact of building energy codes on total household energy consumption, Climate Policy Initiative (CPI) found that U.S. building energy codes have reduced household energy use and greenhouse gas emissions. The study also found that states adopting these codes, which encouraged the use of highly efficient natural gas heaters and electric heat pumps, shifted their energy use away from oil and wood fuels towards lower-emissions natural gas.

Residential buildings consume 22% of U.S. primary energy use and produce 21% of U.S. carbon dioxide emissions, so the ultimate potential impact of building energy codes is substantial. Most states have adopted Department of Energy (DOE)-recommended model codes, first set in 1992 and subsequently updated several times; others have written their own standards. Seven U.S. states – Alabama, Mississippi, Missouri, North Dakota, Oklahoma, South Dakota, and Wyoming – do not have mandatory building energy codes. Other states such as New Mexico and Maine are considering reverting to less stringent codes.

CPI’s analysis, which reviewed states’ energy use from 1986 to 2008, found that states adopting national model codes have achieved an approximately 10% reduction in household energy use, and a 16% reduction in household greenhouse gas emissions.

“Engineering models suggest that U.S. building codes should deliver energy savings; we now have solid evidence that they do,” said Kath Rowley, director of Climate Policy Initiative‘s San Francisco office. “States looking for ways to reduce energy use should take note.”

The analysis is part of a broader project by CPI to evaluate the impacts of building policy in key regions around the world. In addition to the U.S. study, a CPI Berlin project indicated that targeting policy at different stages of the retrofit decision process may help Germany meet its target of 80% reduction in primary energy consumption of buildings by 2050. CPI at Tsinghua is completing a study on the methods used to assess the impact of Chinese building codes.”

They say the chimp “market” is the basis out of which friendship develops.

Funny, I with my 1950s notions of how the world works would have thought friendship more likely evolved first, and that what’s called the “market” developed out of that foundation.

Or as someone put it decades ago — democracy is needed to develop a free market; once developed, a free market no longer needs a democracy (and may well find economies of scale argue against democracy).

“… Then the earth’s savings, and new ways to use them, began to be discovered. Mankind became committed to the fatal error of supposing that life could thenceforth be lived on a scale and at a pace commensurate with the rate at which treasure was discovered and unearthed. Drawing down stocks of exhaustible resources would not have seemed significantly different from drawing upon carrying capacity imports, at a time when nobody yet knew Liebig’s law, or the principle of scope enlargement, or the distinction between real and phantom carrying capacity, or the various categories of ghost acreage.

Homo sapiens mistook the rate of withdrawal of savings deposits for a rise in income….”

Catton, _Overshoot_

[But that doesn’t answer the question. We’re drawing upon capital, certainly, but we are (in part) re-investing it: in infrastructure, in knowledge. How does the balance go? -W]

I’ll be curious to see the comparable article promised on Chinese building codes; I wonder if compliance is documented; I wonder if smog will be counted or waved off as an externalized cost they need not take into account.

“Calera’s scheme is not without skeptics. The company’s claims became the subject of debate in a Google Groups forum …(when the company had a diagram of its process on display at the California Academy of Sciences) and criticism from Ken Caldeira, a professor in the Carnegie Institution Department of Global Ecology who studies carbon sequestration. Caldeira argued that from the publicly available info about Calera’s technology, it seems to go “in the wrong direction and will tend to increase and not decrease atmospheric CO2 content.”

Constantz responded in an email posted to the forum by slamming Caldeira’s scientific credibility and dismissing the criticism as a thinly veiled attempt to determine whether any of Calera’s processes infringe on a patent held by Caldeira and research partner Greg Rau….”